Budgetary cost of increasing public sector wages from €1,000 to €1,300

To estimate the cost of increasing the average public sector wage in Albania from €1,000 to €1,300 by 2030, the following methodology can be applied:

1. Cost of the First Reform (€730 → €1,000)

According to available data, the increase in public sector wages from €730 to €1,000 (an increase of €270) cost approximately €400 million per year.

This implies that for every additional €1 in wage, the cost to the state is about:
€400 million / €270 ≈ €1.48 million per euro increase

2. Cost of the Second Increase (€1,000 → €1,300)

The proposed increase is €300 per employee. Using the same cost ratio:

€300 × €1.48 million = €444 million per year

3. Additional Factors to Consider

If the government aims to raise the average public sector salary to €1,300 by 2030, the estimated annual cost would be around €444 million. However, this is a baseline estimate, and several factors could affect the actual expenditure:

• Size of the Public Workforce:
  If the government implements efficiency measures, such as digitizing services and optimizing administrative structures, the workforce may remain stable or even shrink—helping contain the overall cost.
  Conversely, if new institutions are created or existing ones expanded, the financial burden could significantly increase.
• Inflation and Economic Growth:
  With projected economic growth of 3.5–4% annually, fiscal revenues may rise enough to absorb this additional cost.
  However, high inflation would erode the real value of wages, meaning that the €300 increase may not translate into a meaningful improvement in purchasing power.
  For example, with an average inflation of 3% per year, a €1,300 salary in 2030 would have a purchasing power equivalent to €1,050–1,100 today.

4. Impact on Public Finances

This wage increase represents a significant burden on the state budget:

• Fiscal revenues currently amount to 26.3% of GDP.
• An annual cost of €444 million corresponds to approximately 1.76% of Albania’s 2023 GDP.

Unless the government increases revenue through economic expansion or improved tax collection, it may need to:

• Cut spending in other sectors
• Or take on additional debt, thus increasing pressure on public finances

5. Total Estimated Cost Through 2030

If the wage increase is implemented gradually from 2025 to 2030, the total cost over five years would be around €2.2 billion, which mirrors the scale of the first wage reform.
Increasing the average public sector salary from €1,000 to €1,300 would cost around €444 million per year, assuming a stable workforce. The success and sustainability of this reform will depend on workforce dynamics, inflation trends, economic growth, and fiscal space. Without proper planning and revenue growth, the reform risks straining Albania’s public finances.